Welcome to the Building Industry Bulletin

Queensland regional construction activity update

The December quarter update from the National Institute of Economic and Industry Research (NIEIR) shows that total Queensland construction activity grew by 14.8% to $34.1 billion in 2006-07. The projected growth for Queensland construction in 2007-08 is 6.3% to $36.3 billion, followed by an estimated 4.1% growth to $37.8 billion in 2008-09. There has been a downward revision from the September quarter report in the estimates for 2007-08, of 2.6%, due to higher interest rates being assumed and capacity constraints operating in engineering construction.

In 2007-08 the contribution of private and public engineering expenditures to total Queensland construction activity is expected to remain high at 97%, with non-residential building contributing 3% and dwelling construction making a nil contribution to total construction growth. The dominance of engineering construction in driving the growth in Queensland construction is likely to continue into 2008-09, with engineering expenditures projected to contribute 110% to overall growth, non-residential construction expenditures explaining 19% and dwelling construction making a contribution of -28% to total growth . This reflects the continuation of the resource development boom, and the significant increase in large scale infrastructure projects to support Queensland’s population and industrial growth, as well as rising interest rates.

NIEIR estimates that the current labour shortage in the Queensland construction industry is 20,000 persons and this is projected to reach 23,000 by the end of 2008. According to NIEIR, this is forcing the maintenance of a high level of inflation, with the real rate of inflation averaging 0.8% in the June and September quarters. On a trend basis, the increases have been fairly uniform across the sectors, although the dwelling sector has experienced slightly larger gains overall.

[View quarterly report] [View NIEIR Annual report 2007]

DPW Contractor Survey

According to the results from the most recent Contractor Survey, the general outlook for subcontractor shortages has seen a slight decline in the December quarter. Currently 49% of PQC contractors report difficulties sourcing subcontractors, an increase of 6% from the September quarter 2007 (43%).

For those experiencing shortages, this is three times as likely to be an overall shortage (74%, up from 68% in September 2007) than one concentrated in a small number of specific trades (26%). Plastering was the primary trade shortage mentioned at 67%, up from 41% in September 2007. Other trades with higher levels of difficulty in December 2007 were Carpentry (62%), plumbing and brick laying both on 56%, while concreting and wall and floor tiling were on 54%. Most of the shortages are occurring in the residential construction sector, particularly the multi-unit low density sector.

On average, contractors estimate they are operating at 79% of their total capacity, down 6% from September quarter. This reflects levels observed over the past year. Two out of three (66%) contractors anticipate workloads will increase over the next three months to March 2008, with above average workloads observed in the Mackay and Fitzroy regions.

Although most contractors (84%) expected building material costs to increase in the short term the outlook for labour costs was less certain with 66% of contractors predicting they would increase (up from 58% in September quarter), and 29% indicating they would remain stable.

[ View the full report ]

PQC Tender Activity

Although tender activity declined marginally during the December quarter 2007 as expected, with the average number of tenderers per project decreasing to 4.3 from 5.3 in September quarter, the number of tender opportunities increased by 50% from the previous quarter.

Whilst there was continued strong interest from prequalified contractors to tender for housing projects during the quarter, the average number of tenderers also increased for a wider range of project types including office accommodation and educational facilities.

Difficulties are however, still being reported with regard to projects in regional areas of Queensland, with many projects continuing to attract only a small number of tenderers.

[ View the table ]

Building Price Movement Forecast

The Department of Public Works forecasts indicate building cost movement for the December quarter increased 2.5% and it is anticipated that through the period to June quarter 2008 cost increases of around 1 to 1.5% per quarter will occur. Further building cost rises are expected during 2008-2009 with the Department forecasting quarterly increases of between 2.5% and 3%.

[ View the table ]

Building Materials Cost Comparison

The only increases in Queensland building materials monitored by the Department of Public Works during the December quarter 2007 were in F14 structural timber by 15.14% and mild steel sections – beams rising by 0.17%.

Over the last 12 months, there has been no increase in the cost of aluminium windows – fixed, float glass tinted – 4mm thick and the 200mm standard concrete block.

According to Reed Construction Data, the most prominent increases during the last 12 months have been in F14 structural timber and 25mpa concrete.

[ View the full table ]

Building Policy News

Handover Guideline

On November 30, the Building Policy Unit released the Capital Works Management Framework – Handover guideline. The guideline provides best practice advice for Government departments on managing handover activities to facilitate a smooth transition between project delivery and operations/maintenance. This document is relevant to project sponsors (and their representatives), building owners/users, contractors/consultants and maintenance providers. To view the guideline click here.

Maintenance Management Framework

A comprehensive review of the Maintenance Management Framework (MMF), the Queensland Government’s policy for managing building maintenance, has recently been completed. The revised version is now available by clicking here.

The revised version provides a more practice-orientated policy and guidance of key concepts including maintenance planning and maintenance reporting and a new emphasis of issues such as: environmental sustainability, health, safety considerations in maintenance activities and the importance of maintenance to overall building performance.

art + place

The art + place policy framework has recently replaced the Art Built-in policy and is designed to create better public spaces across Queensland. The policy supports the public art fund announced in the 2007-08 State Budget. The fund provides for an allocation of $12million over 3 years to public art. Under the policy framework, Queensland Government departments, local government, not-for-profit arts and cultural organisations, arts and cultural festivals and private sector partners are able to access the fund managed by Arts Queensland.

The framework is administered by Arts Queensland, part of the Department of Education, Training and the Arts and may be accessed here.

Local Industry Policy

Revision of the Local Industry Policy was approved by Executive Government in November 2007. The Local Industry Policy demonstrates the Queensland Government’s commitment to ensuring that local industry is given a full, fair and reasonable opportunity to be considered for major project work being undertaken in Queensland, in both the public and private sectors.

The Local Industry Policy applies to infrastructure and resource based projects valued at more than $5 million that are undertaken by departments and agencies, and to similar projects in regional and rural Queensland valued at more than $2.5 million. The Policy also applies to capital asset acquisitions valued at more than $5 million by departments and agencies and may impact private sector projects supported by government.

The Policy is administered by the Department of Tourism, Regional Development and Industry and may be accessed here.

State Procurement Policy

The State Procurement Policy recently replaced the State Purchasing Policy with effect from 1 January 2008. The State Procurement Policy applies to departments, statutory bodies and Government Owned Corporations. It aims to achieve improved outcomes in government procurement and focuses on collaboration at the whole-of-Government level and a stronger role for the Queensland Government Chief Procurement Office (QGCPO) (previously Queensland Purchasing) in the Department of Public Works in leading the improvement of the sector’s procurement performance.

The policy is administered by the QGCPO and may be accessed here.

Contractor/Consultant Service Risk Assessment Guidelines

The Consultant PQC: Service Risk Assessment and Contractor PQC: Service Risk Assessment guidelines have been updated to reflect recent amendments to the Capital Works Management Framework. In particular, Table 1 of the Contractor PQC: Service Risk Assessment guideline has been reformatted to present the revised definition of a High Risk/Significant (HRS) building project.

Policy Advice Note - Environmental Rating Systems

Discerning use of rating systems (or rating schemes) can assist departments to identify opportunities to reduce energy, water usage and waste production and implement sustainable procurement practices in the planning, delivery and management of government buildings.

A policy advice note, Environmental Rating Systems and Government Buildings, providing an overview of the nature and application of contemporary environmental rating systems for buildings has recently been released. The policy advice note is available by clicking here.